Bangalore: Last year, as the global economy crashed, Toyota Motor Corp. froze investments in new plants. India was the only exception. Hiroshi Nakagawa, managing director of Toyota Kirloskar Motor Pvt. Ltd, says Akio Toyoda, president of Toyota Motor and grandson of its founder, asked him to “go ahead” with India expansion plans. After 10 years of being in the country, the company plans to step things up a notch with the launch of its small car next December. The car will be showcased at the Auto Expo in New Delhi in January.
Nakagawa, who aims to make Toyota the most admired car company in India, spoke about the firm’s plans. Edited excerpts:
Core vision: Nakagawa says it’s time to be ‘totally different’ in India. Dharmender / Mint
Sales have now picked up but industry watchers fear that this is a temporary blip. Have you seen sales continuing to be robust after Diwali?
I’d like to look back to a year ago. We were impacted after the bankruptcy of Lehman Brothers. After that, there was a recovery that started in the first quarter of this year. Now we have reached the highest sales when compared to last year. There are a couple of reasons for this—the market strength and new launches. Eighty per cent of the Indian economy is about domestic consumption and 20% is export-related and so the economy has very strong fundamentals. Immediately after Lehman, the Indian government took action to inject liquidity and many car makers introduced new models, especially Maruti and Hyundai. And customers were interested in the new cars and so the market recovered. In 2009, we expect to sell 52,000 cars or more. That number is higher than last year.
The kind of demand you’ve seen for the Fortuner (the company’s new sport utility vehicle) seems to suggest that making a car in India and pricing it right is a winning combination. What stops you from doing that for other models like, say, the Camry? Would you look at assembling other models in India as well?
Our basic policy is to maximize local production for both cars and components. We’re very keen on parts localization. Our final target is 100% localization. That’s the same philosophy we’re going to try for carmaking. But there is a problem with resources and so we need to take a step by step approach. We’ve introduced the Qualis, Innova, Corolla, Fortuner.
So what now is the next step?
The next step for us is the small car. I cannot tell you now what our plans after that are.
The small car is on a new platform made for the Indian market.
But your competitors such as GM, Ford and Honda also have aggressive plans for this segment. What is Toyota’s strategy going to be?
We will start production from end of 2010. Sales will start in January 2011. Firstly, we are looking at big volumes as this is a car made for the Indian market, for Indian customers. As India is a very important market, any car manufacturer, including us at Toyota has been attracted to this market. What is important is the sort of acceptance we can get from the Indian people. Once people accept our product we’ll enjoy good volumes. Once we succeed, then we’ll export the car. That’s our plan.
What sort of a role did Indian engineers play in the making of this car?
In the development stage, Indian engineers took a very prominent role. We have a technical division at Toyota Kirloskar Motors. About 50 engineers were involved in the development of this car, sometimes in Japan and sometimes here. It was a collaborative effort. Our global technical centre in Japan is a huge facility—more than 10,000 engineers work there—they were in overall charge of this vehicle. But Japanese engineers kept visiting India during the development process.
Toyota has completed 10 years in India. What is your Japanese parent’s vision for India? Where will the local unit be in the next five years?
The first 10 years have been the start-up period. We were beginners in the Indian market. Now the time has come to jump—(to be) totally different. That is the vision.
How big would you like to be in India? Some foreign car makers have stated that they’d like to have a 10% market share in a few years.
Our target is 10% by around 2015 or 2016. Our vision is to be one of the core companies in the Indian market. The Indian market is expected to be nearly double what it is today—four million (if you include commercial vehicles). We’d like 10% of that in the next decade.
Do you see Toyota becoming like Maruti, primarily a small-car company? Where do you see the majority of your sales coming from?
At nearly 70-75% (of all cars sold), small-car sales are very big in the Indian market.
Once we make a small car, our volumes would come from this segment. Our strength will come from a huge line-up unlike Maruti that is strong only in the small-car segment.
Toyota dealers have been used to selling cars that retail for at least Rs10 lakh, but selling small cars is a different ball game. How will you train your dealers to sell small cars?
No, I don’t think so. Our dealers’ network will be expanded. What they need is good human resources practices and good capability. Small car users are certainly different but all that matters is customer satisfaction. Our dealers are world class. What matters is car quality and service quality.
Are there some aggressive localization plans for the small car?
Of course. But currency fluctuations is another headache. Once we localize 100%, our business will be free from these troubles. At present, localization levels are at 50% for our models but the small car will be launched with a lot more local content.
When are you launching the Prius in India?
It will be showcased at the Environmentally Friendly Vehicles Conference in New Delhi on 23 November. The car will go on sale in January. We have no plans to make the car in India but one of my dreams is to see a hybrid made in India.
What sort of volumes would you need to make cars such as the Prius in India?
This is a difficult question. I have no idea.